from the so...-competition-works? dept

As you've probably heard, this morning Google confirmed the rumors that Austin, Texas would be the second city in which Google Fiber is rolled out. Google still appears to be treating this as an experiment, rolling it out in just a few areas, but it's still worth watching what happens. For example, within hours of Google making the announcement, AT&T rushed out a somewhat hilarious press release insisting that it, too, would build a 1 gigabit fiber network in Austin. No one actually believes this is true. What you're seeing is a bit of gamesmanship, but which reveals something interesting. First up, AT&T is clearly using this to complain about the deal terms by which Google got the rights of way in Austin. Google, famously, got Kansas City to kick in all sorts of concessions that made it extra favorable for Google to build its network there. No doubt, the city of Austin offered similar benefits to Google to be city number two. And, so, within AT&T's press release, there's this little tidbit:

Today, AT&T announced that in conjunction with its previously announced Project VIP expansion of broadband access, it is prepared to build an advanced fiber optic infrastructure in Austin, Texas, capable of delivering speeds up to 1 gigabit per second. AT&T's expanded fiber plans in Austin anticipate it will be granted the same terms and conditions as Google on issues such as geographic scope of offerings, rights of way, permitting, state licenses and any investment incentives.

In other words, sure, sure we'll build a 1 gigabit fiber network. Just give us the same favorable terms you gave Google. Basically, AT&T's announcement has little to do with actually offering a competing service, but much more about calling attention to the favorable terms that cities are giving Google to get Google Fiber. Now, this is something that deserves reasonable scrutiny. Some are quite understandably concerned that it's not right if Google gets extra-favorable terms. But, let's look at the real history here. Municipalities have been giving AT&T and other incumbents incredibly favorable deals for years, and AT&T has tended to return the favor by providing the bare minimum in quality of service to its broadband customers, while focusing most of its efforts on trying to block any hint of competition from showing up.

Google, on the other hand, seems to be using these incentives to offer a much higher level of service, and the early reviews from Kansas City have been fantastic. In short, both companies have been able to squeeze concessions and favorable deals out of the cities in question. One of them pocketed the cash and gave customers the bare minimum. The other focused on providing a truly impressive level of service.

The other oddity in all of this is just how much this press release makes AT&T look bad. Beyond the petty "hey, give us what Google got" statement, this press release more or less confirms exactly the message that AT&T has been trying to deny for years: that when there's real competition, then AT&T will invest in making a better service. Without the competition, AT&T is happy to provide crappy service. But within hours of real competition showing up, it suddenly claims it'll offer a better level of service? Is that really the message it wants to send? If I'm any city, state or federal government in the US at this point, I look at today's announcement and say, "well, AT&T just admitted that they'll offer better service if there's real competition, so how do we make sure there's real competition?" Given how hard AT&T has fought back against real competition in the broadband space for the past decade, it's not clear this is the message AT&T really should be spreading.

We are thrilled to announce we will extend the same terms to you that we have extended to Google immediately upon receipt of verification that you have completed upgrading all of your existing service to 1 gigabit.

Reminds me...

Reminds me of my hometown. They rolled out fiber a few years back. For some reason, the local cable company hasn't raised its rates there since, even though they've gone up a dozen or so times elsewhere in the country...

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Compared to what the cable and telcos offer that's a good deal.

I'm a big proponent of muni-fiber. I mean you don't see the power companies trying this crap*, and they're government regulated. The problem is, the incumbents have put all sorts of roadblocks for municipal broadband, so Google had to step up and do it themselves. I wonder how Google would feel about a deal where they turn everything over to the city in 10 to 25 years.

* I live in an area with some of the cheapest electricity in the US, you're results may differ.

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Google has said they don't view this as business. It's a move that is supposed to put pressure on the US to catch up broadband speeds. However, if they roll it out in enough cities, they may just change their minds.

If the telcos want to stop Google, they could, *gasp* roll out higher speeds before Google does it.

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You sir are correct. It's going to be a several city experiment tasked with embarrassing carriers to upgrade their last mile connections (mixed results so far), collect the kind of real-world ISP network data carriers protect fiercely, test next-generation ad deliveries, and net oodles of free press as people lament the crappy speeds they currently have courtesy of our tepid broadband market competition.

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I would tell them that Google came forward with an offer and the council decided to accept it, if AT&T can come up with an offer they will also be allowed to implement their fiber network. Then the council can accept in areas Google has not planned on going to, thereby giving more people access to fiber at 1gb and the same price structure. But it should also come with quality agreements and the option for the council to cancel any agreement if those obligations were not met within a timely manner..

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The power companies are trying all sorts of stuff too. For example, they are now/have recently been installing new meters everywhere. These new meters tell them the time of day that you use your power. If you use them during peak hours they charge you more. This is so that they don't have to expand their infrastructure. The end result is that everyone now pays more for the same service that they used to pay less for and the power companies do not have to expand their infrastructure. They don't have competition so they can do what they want.

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To be fair we've had similar stuff in the UK for ages. It makes sense to charge people more during peak-usage hours as the higher the load, the more electricity the company has to source - which may be more expensive at short notice or from further away.

Peak hours billing can tend to encourage people to do high-load but low-priority usage at better times. For instance, one of the popular tariffs in the UK was (is?) Economy 7, which allowed people to get cheaper electricity overnight - so it was a great time to run the washing machine or dishwasher, whilst freeing up 'daytime' power for more immediate needs.

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And you will likely not be able to get a signal through AT&T. Google also offers a free 5 megbit connection as long as you pay for the construction involved with getting the fiber optic link to your house...

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FTFYAnd, I agree. Their caps would probably be something like 300 GB/month. In other words, full speed for a whopping 40 minutes. Oh, and that's just down, their upload speed will probably be only 1 Mb/sec; can't have other people distributing content easily...that's AT&T's business model.

Re: DSL

It's mostly smoke and mirrors. Having a fast area connection still helps. You will of course be bottlenecked by your home's connection but you are less likely to be impeded by your neighbors connection.

But that is here nor there. Google is offering fiber to your door one would assume that ATT's "new" "offering" would be the same. Though you are correct currently ATT runs to your house over phone or, if your lucky, coax.

Re: DSL

They primarily offer fiber to the node, then DSL to the home. In a few high-end developments they offer fiber to the home, though they cap the speed at slower DSL speeds for some reason. Of course then you get to layer the overages on top of that...

Even IF major cable/telco providers (we'll be general even though AT&T has shown to be extra special) attempted to match the 1 Gbps from Google, would you want in? I mean seriously, it get's old calling Comcast every couple months to negotiate a new price, having AT&T drop my call, or hitting a data cap.

What I'm basically getting at is if Google offered a connection, even at my current speed, I'd jump on it.

Last night, someone on reddit posted a mailer that came from comcast that states they were automatically upgraded to a faster service at no charge, the kicker to me was that they stated that all they needed to do was power cycle their modems for the increase of speed. If the speed didn't increase it was due to an older modem and it would be replaced.

Seriously, that just tells me that they are sitting on the technology. I can't wait for Google Fiber to go nationwide to bring back ACTUAL competitive markets for these services.

Google and AT&T, if there was ever an example of what granted monopolies do this is it.

One company gets all the perks and give the finger to customers the other which is not so comfy get the perks and works hard to create a favorable environment this includes serving your actual customers.

One company can compete globally and trash the competition anywhere, the other can only do in their home turf with heavy protection from the government, who do we think will survive and prosper?

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Based on past examples quite possibly the company receiving legislative protection.

All AT&T has to do to survive is match what the competition offers and let build-out costs choke out attempts to undermine their monopoly.

The serious danger that google poses to AT&T is the positive externality they gain merely from the presence of fast networks. AT&T doesn't capture any such profit so google can undercut their price at a sufficiently large scale (tho to deploy at such a scale google might have to substantially raise prices and risk losing customer affection as a result).

Capitalism.

This is standard cutthroat capitalism. An oligopoly or monopoly isn't going to offer more than the most basic of basic services in return for outrageous fees. Why would they? They are required by law to make the maximum profit for their shareholders, which means as low quality as possible for as much money as possible.

The same mechanism is in EVERY BUSINESS in every walk of life on planet Earth. It's one of the primary mechanisms that's destroying humankind, in fact.

So of course, if a competitor comes along that is large enough and threatening enough and with a compelling enough alternative, they'll change their tune - until such a time they can form an oligopoly with the new competitor so they then jointly jack up the costs and lower the quality again.

In a capitalism, monopolies and oligopolies are the inevitable end result in every field. The only reason this case is a bit different is that Google isn't a business built on providing Internet connectivity - they sell cloud services, so they can take a financial hit from this because having superfast broadband enables them to sell their services.

If Google were your typical ISP, they'd be oligopoly-ing along with the rest of them in short order.

Only someone truly stupid would think that AT&T doesn't work this way. The lack of competition is keeping quality hideously low, and they won't build better until somehow forced.

Re: Capitalism.

>In a capitalism, monopolies and oligopolies are the inevitable end result in every field.

That's utter hogwash. Study some econ. In fields with low barriers to entry and substantial risk of failure neither monopoly nor oligarchy is the natural result. Indeed, in certain industries the natural result is many small competitors.

For instance in food service (restaurants) the risk of failure is quite high while the cost of entry is relatively small. As a result you tend to have many small independently owned (tho perhaps franchised) companies since aggregating many restaurants into one conglomerate would undermine the limitation on losses provided by bankruptcy while offering little advantage.

In contrast providing high speed internet requires a gigantic capital outlay and has a fairly small chance of failure (you know people are willing to buy your service and once you've made the initial capital outlay it would be unprofitable for any competitor to duplicate your expenditure since they would expect to receive no return on investment provided they don't have substantially lower marginal costs...and in the high speed internet business marginal costs are a few trucks out repairing outages).

High speed internet is a natural monopoly as a result and thus it makes sense for it to be provided as a municipal service as are roads and electricity.

After talking with a friend involved in testing at AT&T they have already sucessfully tested 2gbps over copper at a distance of 1200ft from the box. That being said its technically possible for them to implement. The plan is to bring fiber to the box and then utilize their copper already run to homes. Just my 2c.

Not in Kansas anymore

After reading more about the story, you find the truth buried in it.

AT&T says they will offer a comparable service, if only they have the same deal as Google.

Well...

Austin City spokesman Doug Matthews said there were no "special incentives" for Google. "The negotiated agreement we had with Google, by state law we're obligated to provide to anybody else who wants to offer the same service," Matthews said.

Good Journalism

O hallelujah! I've read two dozen blogs and news items mentioning the AT&T angle, and yours is the first one not to take them at their word and burble on about how exciting this supposed fiber race will be. I want to congratulate you on being the first I've seen to treat this with real journalism.

You probably won't see as many people calling out AT&T's BS; I've been locked out of my Facebook account due to one of their agents filing a complaint against me for pointing out exactly what you say in this blog. I'm seething mad now. AT&T gave us exactly 2.58Mbit/sec and not a tenth of a point more, when our "classic" DSL went straight to the nearest Uverse box with the rest of their customers. They're sabotaging legacy customers to goad them into converting. Now we have Time Warner, at 6x the speed and half the cost. TW also delivers what we are paying for.

A group of South siders, called "Dawson Fiberhood" are looking for media exposure for their drive to get Google to hook them up first. Contact details are at dawsonfiberhood blogspot com